Abu Dhabi's NBAD reports profit rise

01 February 2017

The lender records full-year and fourth-quarter 2016 profit growth

National Bank of Abu Dhabi (NBAD), the biggest lender in the UAE by assets, has reported a modest 1 per cent increase in full-year 2016 profit, pulled back by a rise in impairment changes for bad debts over the past year.

The lender, which is in the process of merging with its Abu Dhabi competitor First Gulf Bank (FGB), recorded net income of AED5.296bn ($1.4bn) for 12 months of 2016, up from AED5.231bn reported for a year earlier period, the lender said in a statement to Abu Dhabi Securities Exchange, where its shares are traded.

The full-year 2016 revenues also grew by 2 per cent to AED10.81bn, up from AED10.56bn for corresponding period of 2015. However, net impairment charges rose to AED1.19bn at the end of 2016, a 26.3 per cent spike from AED934m reported a year earlier.

“The bank’s impairments are reflective of the ongoing challenging operating environment, particularly in the retail and commercial segments,” the lender said in a presentation posted on the bourse website. “Results are in line with guidance and continue to reflect NBAD’s prudent provisioning approach.”

Most banks in the UAE and in the wider gulf region have struggled to maintain healthy profit growth amid sluggish economy and limited growth opportunities in over-crowded domestic markets as governments cut spending on the back of a fall in the oil prices.

The net profit for three-months ending 31 December 2016, however recorded a 28 per cent growth to AED1.32bn, up from AED1.04bn as the amount allocated to cover non-performing loans decreased by 28.7 per cent to AED311m in the last three months of the year.

“From both a full-year and fourth quarter perspective, it has been a good period for NBAD and the bank has performed in line with market expectations and our previous guidance,” NBAD group chief executive Abhijit Choudhury said in the statement. “Our priority for the year ahead is to bring together NBAD with FGB and central to that is ensuring our existing customers and those of FGB experience a smooth and transparent integration”.

In July, the boards of the two Abu Dhabi government-controlled banks voted to merge the two financial giants and recommend the deal to respective shareholders. The transaction is expected to be completed early in 2017 and will create the largest lender by assets in the Middle East and North Africa (Mena) region.

FGB has been named as the acquirer of NBAD, despite NBAD being bigger in the size in terms of assets, the lenders said in a statement in August. The deal, which was previously described as the merger of equals, is being carried out as an acquisition by reverse acquisition of NBAD by FGB to abide by accounting policies.

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